Another SOS signal (Sell On Strength) at -102 making 5 in 7 days. That cluster size is rare but SOS signals occurring in established uptrends generally produce 50+ pt drops within 3-7 days. Probably not good.
Real-time consumer discretionary spending continues to deteriorate. Definitely not good.
Bad world economic fundamentals despite a peaking business cycle, max corporate productive efficiency, low interest rates, massive stimulus, money creation, manipulation and jawboning. Not good.
The stock market's fate rests on the shoulders of world central banks because countries, states and politicians are trapped by laws, votes and economic realities. Based on recent history, that won't be a horrible fate. However, even central banks know they cannot solve things on their own and they must keep the drug dependency, inflation and bailout expectations in check. If I were not one of the extreme doves (Keynesians) on the FOMC, I would be afraid that any sizable central bank easing/rescue at this point would probably allow politicians in many countries to merely delay things further and implement watered-down "fixes". And, knowing that ultimately a lot of economic pain is expected over 5 to 10 or even 20+ years, I wouldn't want to be the one getting blamed for it by enabling bad government and inflating things at stock market highs. Also, keep in mind, Greece is now subject to an all-month austerity review in September, Germany is expected to decide the legality of European bailouts in Sep/Oct, the US is holding elections in November with transition in January, the US fiscal cliff awaits in Jan-Mar 2013 and the lull between travel/school spending and holiday spending ensues shortly.
Thus, while I think central banks will ultimately do what they do best...string the addict along...I think they need to send an occasional message (with actions, not false words we've seen thus far) about who is the boss, who is the savior and who is not the puppet to be played by lazy politicians and the elite. And, the next few months would appear to be the perfect time to do so. I suppose you could argue that central banks could prop things up until they see how things are handled by governments until Q1 2013, but I think they already know how politicians would respond without an emergency in their face and a moment passed is a moment not captured and they might be blamed for enabling bad government or inflation or over-acting at that point with little to fall back on. So, my logic suggests central banks will maximize jawboning to avoid panic but minimize action to push governments and then come out smelling like a rose on the other end whether they are credited for forcing governments' hands successfully or saving them when they fail.
That does not preclude SPX from besting 1422 now or after a retest of 1267, but, if things play out like I'm thinking, there will be 2 or 3 very bad months in the next 6 months and SPX has a good chance to retest 1050-1150 at some point. For the time being, the US Dollar has a decision to make that should affect the next 2-4 weeks. Good luck.
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